F&I

Chrysler Wants $3 Billion More From Government Bailout

January 12, 2009
• by Staff

DETROIT -- Chrysler LLC is seeking $3 billion in additional government aid and its finance arm is in advanced talks with the U.S. Treasury to obtain a multi-billion-dollar cash infusion that could be finalized by Friday, according to The Detroit News.

Chrysler is the only one among Detroit's Big Three automakers seeking immediate additional aid. General Motors Corp. said it had no plans to seek more aid beyond the $13.4 billion the U.S. Treasury Department is loaning it from the $700 billion Wall Street rescue fund, known as the Troubled Asset Relief Program, or TARP.

Ford Motor Co. said Sunday that it would not seek a $9 billion line of credit as planned because the company was satisfied that it would receive government help if auto sales weaken substantially this year.

"All the mechanisms are in place that if (the economy) really degraded, then we'd be able to ask for help, but right now we have no plan to do that," Ford CEO Alan Mulally told The Detroit News on Sunday.

Chrysler received $4 billion last month from the TARP fund. The automaker had fought for $7 billion to survive through March 31 and Chrysler Vice Chairman and President Jim Press said Sunday that he hoped to obtain the remaining money.

"We are making good progress to qualify for a total of $7 billion, which puts us in a really good financial position," Press said.

The Treasury Department declined to discuss the talks. "We're in touch with the automakers and their financing sources and continue to evaluate their financing needs," Treasury spokeswoman Brookly McLaughlin said Sunday.

Detroit's automakers are struggling to reorganize amid one of the worst auto markets in decades, which forced GM and Chrysler to seek government loans to survive. Auto sales fell 18 percent in 2008, the lowest yearly tally since 1992, and demand is expected to be weak again this year.

Consumers have largely stopped shopping for cars and trucks as credit markets tightened and many could no longer qualify for loans.

Chrysler said last month that 20 percent to 25 percent of its customers couldn't get credit to buy new vehicles, which was one reason the automaker's sales plunged 53 percent in December, the highest of any automaker.

The Bush administration is working to complete action on financing help for Chrysler Financial LLC before it leaves office on Jan. 20. A government official involved in the talks said it would be less than the $6 billion package GMAC LLC received.

"We're very hopeful that (with) continued support from the Treasury and access to the TARP funds for Chrysler Financial that we'll be able to provide additional retail support," Nardelli said. "Our hope is we would get that resolved within a week or so."

Nardelli declined to say how much Chrysler Financial was seeking but said he hoped "it would provide the kind of support for us in a similar fashion that GMAC was able to provide to GM."

After receiving its TARP money, GMAC announced new financing deals for customers and dropped its credit requirement for loans from a score of 700 to 621.

GM CEO Rick Wagoner called the government's decision to aid GMAC "a huge plus." GM owns 49 percent of the finance company. Cerberus Capital Management LP, also Chrysler majority owner, holds the other 51 percent. "We are going to see some very significant changes in GMAC's ability to fund both wholesale and retail (lending)," Wagoner said. Those loans will be "on a more cost competitive basis. ... Frankly, over time it's going to be a strategic advantage for us."

Neel Kashkari, the assistant Treasury secretary who heads the TARP program, last week explained why it was important for the government help GMAC. "The finance companies serve as the lifeblood of the automakers," he said. "We knew that our program would need to address the short-term needs of the auto finance companies as well."

Detroit's automakers also are seeking loans from a $25 billion Energy Department retooling program to help modernize factories to build more fuel-efficient models.

But some foreign automakers that build cars and trucks in the United States are upset because provisions in that program make it difficult for them to get access to the money.

"If we're going to produce a vehicle with 80 percent domestic content," Volkswagen would like the ability to access the funds, said Anna-Maria Schneider, VW's top U.S. government affairs official. "We're keeping our eyes open."

She said it was important to note that the German government was providing support for GM's German unit, Opel. Last week, Germany pledged as much as 1.8 billion euros ($2.4 billion) for Opel, which employs 26,000 people in Germany.

"We just ask that if you look at the other countries -- Germany, of course, is making money available to Opel -- so we hope the U.S. government won't exclude us," Schneider said.

VW hasn't applied for any loans under the Energy Department retooling program. It is building a $1 billion plant to build mid-sized sedans in Chattanooga, Tenn., starting in 2011.

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